Corporate directors and managers’ guarantees. Capitalization of accounts and of irrevocable capital contributions. Clarifications

The Public Registry of Commerce (hereinafter “PRC”) issued General Resolution No 1/2005, published in the Official Gazette on February 8, 2005, and in force from the same date, which clarifies certain matters related to:

a) guarantees that corporate directors and managers must provide for the performance of their office in accordance with PRC Resolutions No 20/2004 and No 21/2004 (please refer to “Requirements for the provision of guarantees by corporate directors” published in Marval News # 32 dated September 30, 2004);

b) the capitalization of financial statements accounts and the capitalization of irrevocable capital contributions in accordance with PRC Resolution No 25/2005 (please refer to “New regulations regarding capital variations, financial statements and irrevocable capital contributions” published in Marval News # 34 dated November 30, 2004).

1.    Guarantees by managers and directors of Argentine companies

On February 7, 2005, Resolution No 20/2004 of the Public Registry of Commerce –which determines that corporate directors of Argentine companies must grant a minimum guarantee of AR$ 10,000 for the performance of their office (and the minimum amount of AR$ 2,000 for managers of limited liability companies with a corporate capital of less than AR$ 12,000 and small-scale activities)– entered into force.

Resolution No 1/05 clarifies some matters of Resolution No 20/04 such as:

a) directors and/or members of management who must comply with the guarantee provided by Resolution No 20/04 are those who were appointed after February 7, 2005;

b) alternate directors do not need to comply with such guarantee unless they assume as regular directors;

c) companies already registered with the PRC must amend their by-laws in order to reflect the new guarantee whenever the first of the situations mentioned below occurs:

(i)the first amendment resolved upon by the shareholders, whose summons is dated after February 7, 2005

(ii)before or simultaneously with the registration of directors with the PRC following the first registration of the directors appointed after February 7, 2005;

d)directors shall maintain the guarantee for at least 3 years counted from the date of termination of their duties as directors.

2.    Capitalization of financial statements accounts and capitalization of irrevocable capital contributions

PRC Resolution No 1/05 applies to all limited liability companies, whatever the corporate capital, the regulations provided by PRC Resolution No 25/04 with regards to the capitalization of financial statements accounts which allow the issuance of paid-up shares, and the capitalization of irrevocable capital contributions.

Therefore, all limited liability companies will have to capitalize any pending balance in what we call “capital adjustment account” and/or “asset revaluation balance” and/or similar accounts which allow the issuance of paid-up shares. Such issuance shall be made taking into account the holdings of each quota holder in the company.

The resolution also extends to limited liability companies, who must file their financial statements with the PRC, namely the obligation to: (i) specify the destination of the balance results when analyzing the financial statements, and (ii) include a note in the financial statements making reference to the refund proceeding, the publications, opposing creditors, amounts, oppositions treatment and, if applicable, date and amount of the restitution.

The irrevocable capital contributions received by the company prior to the date of enforcement of PRC Resolution No 25/04 must be capitalized and/or refunded within 180 days as from the enforcement of PRC Resolution No 1/05 (that is, 180 days as of February 8, 2005), or the lesser period if such were decided in written form. Lastly, PRC Resolution No 1/05 provides the rules to be followed in case the refund and/or capitalization of such irrevocable capital contributions is decided.